Legislature(1999 - 2000)

02/16/1999 01:35 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HOUSE JOINT RESOLUTION NO. 12                                                                                                   
Relating to federal claims against funds obtained by                                                                            
settlement of state tobacco litigation.                                                                                         
Co-Chair Therriault pointed out to the Committee that                                                                           
Representative Harris and his staff worked with the                                                                             
Chairman's office in preparing the proposed committee                                                                           
REPRESENTATIVE JOHN HARRIS spoke to the work draft that                                                                         
addresses the tobacco settlement which the State of Alaska                                                                      
has been involved with the federal government.  The State is                                                                    
requesting Congress to not include funding from the lawsuit                                                                     
in the federal budget.  The lawsuit states that Alaska,                                                                         
along with other states, should receive the full amount of                                                                      
those funds.                                                                                                                    
DOUG GARDNER, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW,                                                                    
distributed a handout "Presentation on Tobacco Issues and                                                                       
HJR 12".  [Copy on file].  The handout summarizes some of                                                                       
the issues relating to the tobacco settlement.  It was                                                                          
Attorney General Botelho's view that in order to better                                                                         
understand the Health Care Finance Administration (HCFA)                                                                        
claims against the federal level, it would be important to                                                                      
create a context for it.                                                                                                        
(Tape Change HFC 99 - 21, Side 2).                                                                                              
Mr. Gardner addressed the enforcement of tobacco vendor and                                                                     
tax laws.  The tobacco vendor enforcement (STING Operations)                                                                    
has resulted in many criminal citations and convictions for                                                                     
clerks selling tobacco.  A settlement has been reached with                                                                     
those vendors.  Rather than litigating those issues with the                                                                    
vendors, the Department of Law has entered into a settlement                                                                    
which provides for a suspension of their licenses and will                                                                      
require that they re-train their clerks.  The stores                                                                            
involved have agreed to make contributions to an advertising                                                                    
campaign to further the effort to educate people that                                                                           
tobacco is a dangerous substance.                                                                                               
He continued, the Legislature has increased the per pack tax                                                                    
with regard to the State sales tax enforcement.  Mr. Gardner                                                                    
noted that there is no evidence of smuggling of cigarettes                                                                      
into the State, however, the State is working to guarantee                                                                      
that all taxes are being paid on cigarettes imported into                                                                       
the State.  The average monthly revenues received by the                                                                        
State has increased from $1.5 million to $4.3 million                                                                           
Mr. Gardner spoke to the litigation and the national                                                                            
settlement which the State has entered into.  The settlement                                                                    
consists of $670 million dollars to Alaska to be paid over                                                                      
25 years.  HCFA, the federal agency that administers the                                                                        
Medicaid program, has taken a position that as much as $400                                                                     
million dollars of the settlement belongs to them.  The                                                                         
State of Alaska, however, assumes that the State did not sue                                                                    
to recover "federal" money.  Mr. Gardner understood that the                                                                    
HCFA claim would not be made until the year has past,                                                                           
allowing time for the issue to be debated.                                                                                      
Mr. Gardner advised that U.S. Senator Murkowski and U.S.                                                                        
Senator Kay Bailey Hutchinson co-sponsored SB 346, which                                                                        
would essentially protect all states tobacco settlement                                                                         
dollars from HCFA's claim.  He pointed out the payment                                                                          
distribution date chart accompanying the handout on Page #5.                                                                    
Mr. Gardner noted that there is currently legislation                                                                           
relating to the settlement.  It is assumed that all states                                                                      
will enact the legislation called the "Model Statute" or the                                                                    
"Renegade Provision".  The Department expects to have the                                                                       
Model Law available and conforming to statute within the                                                                        
next two weeks.  It is not necessary for this legislation to                                                                    
be enacted in order for the State to receive settlement                                                                         
money, but it is essential for it to be enacted against the                                                                     
tobacco industry fight.                                                                                                         
Co-Chair Therriault asked if the Department was involved                                                                        
with any litigation with Internet sales currently taking                                                                        
place for tax-free cigarettes.  Mr. Gardner replied that                                                                        
anyone who causes cigarettes to be imported into the State                                                                      
of Alaska must have a license and must pay tax.  The                                                                            
Department of Revenue is monitoring that activity closely.                                                                      
Co-Chair Mulder asked how much the State would be receiving                                                                     
from settlement payments.  Mr. Gardner stated that a total                                                                      
of $8.1 million dollars followed by $30 million dollars                                                                         
would be received before June 30, 2000.                                                                                         
Representative Bunde questioned the use of the settlement                                                                       
funds, and asked if the committee substitute was essential.                                                                     
Mr. Gardner advised that the State's position is that we do                                                                     
not want the federal government to "take" any of this money.                                                                    
However, many states are taking steps to try to comply with                                                                     
the McCain Bill.  The debate on that legislation states that                                                                    
if you use 50% of the money from the tobacco bill to                                                                            
supplement existing health care programs, the feds would                                                                        
then assume a "hands-off" approach.  Many states are                                                                            
allocating funds in a way which would insulate them from                                                                        
HFCA's plan.                                                                                                                    
Representative Bunde asked, without the resolution, could                                                                       
the State spend these funds on something other than health                                                                      
care.  Mr. Gardner pointed out that the proposed resolution                                                                     
does not deal with particular appropriations.                                                                                   
Co-Chair Therriault stated that the McCain Bill did not pass                                                                    
U.S. Congress.  Mr. Gardner added that the Attorney General                                                                     
believes that this is a long-standing commitment of HFCA and                                                                    
that agency wants to see the problem fixed and health care                                                                      
interests addressed.  Representative J. Davies asked if                                                                         
there was information available regarding the position of                                                                       
HFCA and that of the Clinton Administration.  Mr. Gardner                                                                       
replied that it is a broadly held view and that he could                                                                        
supply some info regarding that concern.                                                                                        
Co-Chair Mulder MOVED to adopt work draft version 1-                                                                            
LS0418\G, Ford, 2/16/99, as the version before the                                                                              
Committee.  There being NO OBJECTION, it was adopted.                                                                           
Co-Chair Mulder MOVED to report CS HJR 12 (FIN) out of                                                                          
Committee with individual recommendations and with the                                                                          
accompanying zero fiscal note.  There being NO OBJECTION, it                                                                    
was so ordered.                                                                                                                 
CS HJR 12 (FIN) was reported out of Committee with a "do                                                                        
pass" recommendation and with a zero fiscal note by the                                                                         
House Finance Committee.                                                                                                        

Document Name Date/Time Subjects